Robert J. Samuelson: The ‘cliff’ deal we need

Neither party alone could pass a package like this. Meaningful budget changes will require “going outside everyone’s current comfort zone,” as economist Timothy Taylor says on his blog. Only a centrist coalition can neutralize opposition from both partisan extremes. Liberal groups are already mobilizing against cuts in Social Security and Medicare. Republican hostility to tax increases runs deep.

These objections are overblown. Millions of comfortable retirees can afford Social Security cuts or higher Medicare premiums and remain comfortable. Likewise, modest tax increases have “a small [economic] growth impact when tax rates are low or moderate,” argue economists Nir Jaimovich of Duke University and Sergio Rebelo of Northwestern University in a study. It’s only when “tax rates are high [that] further tax hikes have a large, negative impact on growth performance.”

Still, ideological purists won’t become pragmatists. Their opposition is one obstacle to a budget deal.

Public opinion is another. The American economy resembles a sick patient who’s been put on a powerful drug: budget deficits. If the drug is withdrawn too abruptly, the patient relapses. That’s the fiscal cliff. But if the drug is never withdrawn, the patient may face highly toxic side effects. That’s a future financial crisis that occurs if lenders refuse to lend at low interest rates. It seems confusing, because it is confusing.

Curb those deficits – but not too fast. No one has adequately explained the messy choices to Americans. Not the president. Not major economists. Not congressional leaders. We are now as far away from the next election as we’ll ever be; the economy is in a modest recovery. Is there a better time to grapple with these perplexing and unpopular problems? Or do we gamble that we can drift along indefinitely?